WEBVTT - Masters in Business: CEO Jonathan J. Miller (Audio) 0:00:03.240 --> 0:00:07.119 This is Masters in Business with Barry Ridholts on Bloomberg 0:00:07.240 --> 0:00:11.320 Radio this week. I have a friend of mine, Jonathan 0:00:11.360 --> 0:00:16.400 Miller of Miller Matrix is his blog and Miller Samuel 0:00:16.600 --> 0:00:21.599 is his shop. Jonathan has been an observer of the 0:00:21.680 --> 0:00:27.320 real estate market and industry for for decades, literally decades. 0:00:28.200 --> 0:00:31.440 We met some years ago. I'm trying to remember if 0:00:31.440 --> 0:00:36.080 the first thing we did was a conference. We were 0:00:36.080 --> 0:00:39.160 on a panel with the old people, Bob Schiller and 0:00:39.320 --> 0:00:42.280 Dottie Herman, who I believe was the head of Prudential 0:00:42.320 --> 0:00:45.479 real Estate at the time, and it was oh seven 0:00:45.600 --> 0:00:48.560 or oh eight, and you know, she was the only 0:00:48.560 --> 0:00:52.160 one who was remotely bullish on the panel. It was Miller, 0:00:52.720 --> 0:00:56.959 Schiller and me, and it was like bear bearer and barrassed. 0:00:57.040 --> 0:01:00.160 It was was pretty amusing. We've been friendly for for 0:01:00.280 --> 0:01:04.040 quite a while. UM. I find him to be really 0:01:04.200 --> 0:01:08.679 a unique set of insights into what's going on in 0:01:08.720 --> 0:01:12.320 the real estate market. What his firm does is gathered 0:01:12.400 --> 0:01:16.399 data from around the country, very often in areas where 0:01:16.840 --> 0:01:20.280 there are no other form of data collection going on. 0:01:20.880 --> 0:01:24.360 Specific data far beyond what we see from the National 0:01:24.400 --> 0:01:29.559 Association of Realtors or what what the commerce department puts 0:01:29.560 --> 0:01:32.640 out about new houses, and he crunches the numbers and 0:01:32.680 --> 0:01:37.440 comes up with some really really interesting perspectives. If you 0:01:37.520 --> 0:01:40.120 go to a real estate agency somewhere and they give 0:01:40.120 --> 0:01:43.080 you a tear sheet that shows you lots and lots 0:01:43.120 --> 0:01:46.760 of information about recent sales and length of time on 0:01:46.800 --> 0:01:49.720 the market and all that sort of stuff. His firm 0:01:49.800 --> 0:01:52.680 is the firm that actually collects that data, analyzes it, 0:01:52.720 --> 0:01:55.560 interprets it, and puts it out. He's got deals with 0:01:55.600 --> 0:02:00.520 a number of different companies. Really a fascinating approach to UH, 0:02:00.560 --> 0:02:04.360 taking data and repurposing it in a way that's useful 0:02:04.400 --> 0:02:08.000 for consumers. I find him to be very, very insightful 0:02:08.480 --> 0:02:12.120 about all things real estate. He also has a column 0:02:12.200 --> 0:02:14.640 now he puts something out once or twice a week 0:02:15.040 --> 0:02:19.120 on Bloomberg View in addition to what he does for 0:02:19.280 --> 0:02:24.960 his UH daily blog at Miller Matrix. Just all around 0:02:25.080 --> 0:02:29.520 nice guy and tremendously knowledgeable and insightful. The most fascinating 0:02:29.560 --> 0:02:32.400 thing UH, and I hope this came across in the interview, 0:02:33.160 --> 0:02:38.079 is he often gets tagged as an expert in divorce 0:02:38.160 --> 0:02:42.320 settlements and litigation and all sorts of crazy stuff, and 0:02:42.560 --> 0:02:46.240 he's I am not exaggerating when I say he's pretty 0:02:46.320 --> 0:02:50.799 much been in every single penthouse in New York City. 0:02:51.160 --> 0:02:54.280 But he's the go to guy to a praise these 0:02:54.320 --> 0:02:57.600 fifty and a hundred million dollar properties. Not a lot 0:02:57.600 --> 0:03:01.600 of people with a deep expert teasing that. And he 0:03:01.639 --> 0:03:04.960 could tell stories and actually has, and we touch upon 0:03:05.000 --> 0:03:09.840 it about some of these apartments that are just un believable, 0:03:09.960 --> 0:03:14.960 just unbleeping believable. It's it's fascinating. And he tells um 0:03:15.000 --> 0:03:17.760 all sorts of fascinating tales about where he's been, what 0:03:17.840 --> 0:03:21.640 he's seen, how stuff gets priced. Is there really a 0:03:21.639 --> 0:03:25.799 difference between forty five and forty eight million dollars? Turns 0:03:25.840 --> 0:03:28.840 out an extra bathroom here and a little bigger window 0:03:28.919 --> 0:03:32.919 there worth three million dollars. It's really quite interesting. If 0:03:32.960 --> 0:03:36.240 you are all interested in real estate, and I am, 0:03:36.280 --> 0:03:38.680 and I assume many of you are, I suspect you'll 0:03:38.680 --> 0:03:42.560 find this conversation to be engrossing. Without any further ado, 0:03:42.960 --> 0:03:49.640 my conversation with Jonathan Miller. This is Masters in Business 0:03:49.720 --> 0:03:54.280 with Barry Ridholts on Bloomberg Radio Today. I'm actually thrilled 0:03:54.280 --> 0:03:57.960 to have an old friend in the studio. You may 0:03:58.000 --> 0:04:02.280 not have heard him directly, but you've probably read a 0:04:02.360 --> 0:04:05.960 quote of his in the New York Times or anywhere 0:04:05.960 --> 0:04:09.320 else somebody is talking about real estate. Today, I have 0:04:09.520 --> 0:04:14.760 Jonathan Miller, founder and CEO of Miller Samuel Welcome to 0:04:14.800 --> 0:04:16.880 the show. Great to be here. And I have to say, Barry, 0:04:16.920 --> 0:04:18.880 you have a great voice for radio. I have a 0:04:18.920 --> 0:04:21.560 face for radio, is what you're trying to say. So 0:04:21.960 --> 0:04:24.560 for those of you who really don't know who Jonathan is, 0:04:25.040 --> 0:04:28.479 he's fairly legendary in the world of real estate. I 0:04:28.480 --> 0:04:30.919 think that's a fair statement. Right, well, at least in 0:04:30.960 --> 0:04:32.839 my own mind. You're on legend in his own mind 0:04:32.880 --> 0:04:36.159 if you're in New York real estate or a few 0:04:36.200 --> 0:04:38.880 So let me back up and give your CV a 0:04:38.920 --> 0:04:42.440 little bit. You're so you started out in this industry 0:04:42.800 --> 0:04:47.320 as a agent and then an appraiser the mid eighties, 0:04:47.400 --> 0:04:49.919 all right, and and what kind of set you apart? 0:04:50.000 --> 0:04:53.000 I want to talk about three things so people know 0:04:53.040 --> 0:04:56.400 who you are. First, you were one of the first 0:04:56.440 --> 0:04:59.440 guys in the real estate world. And this sounds insane 0:04:59.440 --> 0:05:02.359 because you would thought this was going on for decades. 0:05:02.760 --> 0:05:06.080 Who said, Hey, all these transactions are generating a lot 0:05:06.120 --> 0:05:09.440 of data. Why don't we take this data and take 0:05:09.480 --> 0:05:11.040 a closer look at it and see if we can 0:05:11.200 --> 0:05:15.440 discern any sort of meaning from how long a home 0:05:15.560 --> 0:05:18.640 is on the market, for what it sells relative to 0:05:18.720 --> 0:05:23.200 its asking price, etcetera, etcetera, etcetera. No one was really 0:05:23.240 --> 0:05:26.600 doing this before you came along, not really. Most of 0:05:26.640 --> 0:05:31.120 what was being done was marketing brochure not or very 0:05:31.200 --> 0:05:34.320 complicated in the sense that it was sort of academia 0:05:34.400 --> 0:05:37.600 and it was hard for the consumer to digest. Uh. 0:05:37.640 --> 0:05:41.000 As journalists say the trend. Three data points make a trend, 0:05:41.040 --> 0:05:42.640 and then I like to say, the trend is your 0:05:42.680 --> 0:05:46.520 friend until it ends right depend at the end. I 0:05:46.560 --> 0:05:49.000 like that that's even better. So that that's my contribution 0:05:49.080 --> 0:05:52.320 to Uh. You know, it's true if it rhymes right right, 0:05:52.400 --> 0:05:55.800 absolutely so the second so, so, assembling the data was 0:05:55.839 --> 0:06:00.000 the first thing you did, and then miraculously you were 0:05:59.880 --> 0:06:04.480 an objective commentator observer. You know, I used to mock 0:06:05.000 --> 0:06:09.480 relentlessly the National Association of David Lay, the Chief Economists, right, 0:06:09.720 --> 0:06:13.320 is painful, just just everything out of their mouths were 0:06:13.440 --> 0:06:16.880 just horrific marketing spin. Well, you have this dilemma. So 0:06:16.960 --> 0:06:19.440 in real estate transaction, to have this, you have this 0:06:20.040 --> 0:06:21.839 if you look at the broad view, you've got it. 0:06:21.920 --> 0:06:26.040 One end of the spectrum. You've got the real estate community. 0:06:26.240 --> 0:06:29.760 It's always a good time to buy was literally it 0:06:29.880 --> 0:06:32.720 was literally an ad they put out in the midst 0:06:32.839 --> 0:06:35.960 of the housing collapse. It's always a great time to 0:06:36.080 --> 0:06:38.800 buy or sell a house. What that really means is 0:06:38.800 --> 0:06:42.000 it's always a great time to generate a commission based transaction. 0:06:42.480 --> 0:06:45.600 And ps, my mother was a real estate agent. This 0:06:45.800 --> 0:06:49.919 was dinner conversation. So I'm not bashing real estate agent 0:06:50.640 --> 0:06:55.200 as an outsider. This was literally what I grew up with. 0:06:55.480 --> 0:06:58.040 So when I mock these people, it's from the inside, 0:06:58.080 --> 0:07:00.880 not the outside, right absolutely. And and then the other 0:07:01.000 --> 0:07:03.560 end of the spectrum is the academics. You know, the 0:07:04.360 --> 0:07:07.359 case Shiller index and and and all the problems of 0:07:07.400 --> 0:07:09.920 that and what the purpose of it is and uh 0:07:09.960 --> 0:07:13.280 and we've really position yourself somewhere in the middle, which 0:07:13.360 --> 0:07:18.000 is essentially in the trenches, providing uh, sort of on 0:07:18.040 --> 0:07:21.320 the ground observations about the market. And one of the 0:07:21.320 --> 0:07:25.160 things that I found really fascinating being an appraiser was 0:07:25.800 --> 0:07:28.840 during the whole big sort of housing boom, run up, 0:07:28.920 --> 0:07:34.120 credit bubble back, uh starting circus, I started seeing it 0:07:34.160 --> 0:07:38.160 in oh three oh four. Uh, no one else was 0:07:38.280 --> 0:07:40.920 talking about it, and I thought it was really bizarre. 0:07:41.120 --> 0:07:43.840 It was you were out in left field, and in fact, 0:07:44.240 --> 0:07:50.520 to emphasize your data slicing skills. So first, the data 0:07:50.800 --> 0:07:54.160 runs that you put together, Actually it's a feed into Bloomberg. 0:07:54.200 --> 0:07:56.000 So if you're on a terminal, I don't know what 0:07:56.040 --> 0:07:59.280 it's called. The Yeah, we have a Manhattan Luxury price index. 0:07:59.320 --> 0:08:02.320 There's three different meat metrics that are used. We also 0:08:02.680 --> 0:08:07.680 have a luxury rental price index. And uh, and I've 0:08:07.680 --> 0:08:14.000 also seen your specific regional housing data. Yeah, here's NASA County, 0:08:14.040 --> 0:08:17.000 here's parts of Flower right. We cover eighteen different markets, 0:08:17.000 --> 0:08:19.600 so we cover we cover a whole bunch of markets 0:08:19.600 --> 0:08:23.400 in New York City, Metro for markets in South Florida, 0:08:23.480 --> 0:08:27.160 and then I'm now starting to develop research in Los Angeles. 0:08:27.240 --> 0:08:31.200 So it's amazing because I'd love to see the San 0:08:31.200 --> 0:08:35.040 Francisco think that would be Uh. I was approached about that, 0:08:35.080 --> 0:08:37.520 but but nothing has come to it yet. But what's 0:08:37.520 --> 0:08:41.240 amazing about it is the concepts of supply and demand 0:08:42.080 --> 0:08:44.959 they don't change all that much. I mean the numbers change, 0:08:44.960 --> 0:08:47.679 how many zeros are After it, I'm amazed what you 0:08:47.720 --> 0:08:50.920 get in l A for a couple of million dollars 0:08:51.040 --> 0:08:52.559 versus what you get in New Ye. Right, Well, you 0:08:52.600 --> 0:08:55.719 always see you always see the celebrity, you know, a 0:08:55.800 --> 0:08:58.240 Johnny Depp or whoever. It's like, Oh, they sold their 0:08:58.360 --> 0:09:00.600 palatial state for three and a half million dollars and 0:09:00.600 --> 0:09:03.840 I'm thinking, well, that's a large two bedroom in Manhattan. 0:09:05.120 --> 0:09:09.200 That is not a prestige play. Speaking of which I said, 0:09:09.240 --> 0:09:11.720 there are three things. The third thing, which is we'll 0:09:11.760 --> 0:09:16.960 get to You've been in pretty much every penthouse in Manhattan. 0:09:17.000 --> 0:09:19.880 Is that much of an overstatement? I have one of 0:09:19.880 --> 0:09:23.880 the most of the greatest experiences seeing these insane penthouses 0:09:24.520 --> 0:09:28.480 the design. However, what I don't usually get to see 0:09:28.760 --> 0:09:31.120 is them in the evening at night. It's always during 0:09:31.120 --> 0:09:32.600 the day, so I don't get to see them all 0:09:32.760 --> 0:09:35.360 lights on the city, which is you know, half of 0:09:35.360 --> 0:09:39.240 the spectacular aspect of review. But we see and you 0:09:39.240 --> 0:09:41.840 know that in itself is a whole different submarket of 0:09:41.840 --> 0:09:45.160 the housing market, uh, which is held up really well, 0:09:45.400 --> 0:09:47.719 which has held up really well because the money is 0:09:47.760 --> 0:09:51.040 almost an afterthought. It's irrelevant. I'm gonna buy this because 0:09:51.080 --> 0:09:52.920 I can, and I don't know. Well, the whole uh, 0:09:53.080 --> 0:09:56.480 just a digress to the whole phenomenon of this high 0:09:56.600 --> 0:10:01.080 end aspect is it's a global phenomenon. It's just unique. 0:10:01.160 --> 0:10:05.360 It's London, it's Hong Kong, it's Shanghai, it's it's to 0:10:05.480 --> 0:10:09.080 any major city. It's it's booming because there's a boatload 0:10:09.120 --> 0:10:13.320 of money. We're talking real estate with Jonathan Miller, CEO 0:10:13.400 --> 0:10:18.720 and founder of Miller Samuel. Let's hold off on discussing 0:10:18.760 --> 0:10:21.400 the penthouses just for a few seconds. I want to 0:10:21.440 --> 0:10:23.240 talk for a moment. I want to pick your brains 0:10:23.240 --> 0:10:28.079 for a moment about what it is that drives most 0:10:28.160 --> 0:10:31.560 of real estate. We put together we were talking about this, 0:10:31.600 --> 0:10:34.439 We're putting together a list, and it was everything from 0:10:34.480 --> 0:10:40.400 demographics and household formation to interest rate wages. But really 0:10:41.280 --> 0:10:43.840 all this comes back down to credit, doesn't it. It 0:10:43.920 --> 0:10:47.680 really doesn't. And that's actually one of the key components. 0:10:47.679 --> 0:10:50.200 If you look at the bulk of the housing market 0:10:50.600 --> 0:10:54.240 right now, it's really defined by access to credit. If 0:10:54.240 --> 0:10:56.199 you look at you know, I always like to say 0:10:56.240 --> 0:10:59.319 housing is local and credit is national, and and so 0:10:59.559 --> 0:11:04.960 literally you know, post Lehman, uh credit crunch. Uh. Every 0:11:05.000 --> 0:11:07.960 market started behaving the same way. We had things like 0:11:08.480 --> 0:11:11.800 rents rising because people were tipped back into the rental 0:11:11.840 --> 0:11:15.800 market because they couldn't qualify. We also had inventory begin 0:11:15.880 --> 0:11:20.600 to fall to record lows nearly universally across all housing 0:11:20.640 --> 0:11:25.480 markets because a homeowner with lower negative equity, which is 0:11:25.559 --> 0:11:31.480 roughly about all homeowners with a mortgage UH, don't qualify 0:11:31.600 --> 0:11:34.920 for that next purchase, either a trade up, a ladder, mover, 0:11:35.000 --> 0:11:38.319 or downsize. So what do they do. They sit and 0:11:38.360 --> 0:11:40.839 they don't. They don't ender the market organically the way 0:11:40.840 --> 0:11:43.400 that normally would bring their house to the market. And 0:11:43.440 --> 0:11:45.840 then people that don't have a credit condition are saying, well, 0:11:46.240 --> 0:11:47.880 I'm not I can't find the house I want, so 0:11:48.000 --> 0:11:50.080 I'm not gonna list my house, and you sort of 0:11:50.080 --> 0:11:52.840 double down on the problem. And only the only way 0:11:52.880 --> 0:11:56.080 out of that are is twofold one is housing prices rise, 0:11:56.160 --> 0:12:01.679 which naturally occurs because not necessarily own demand correct and 0:12:01.679 --> 0:12:05.040 and and or if strong fundamentals either. It literally is, 0:12:05.400 --> 0:12:08.360 if you can strain the supply, prices rise. And that's 0:12:08.400 --> 0:12:12.400 been my biggest criticism of the pronouncement of the US 0:12:12.480 --> 0:12:16.000 housing recovery as early as you know two years ago, 0:12:16.960 --> 0:12:20.760 because the fundamentals in terms, you know, incomes generally stagnant 0:12:20.840 --> 0:12:23.680 in the US, unemployment even though the numbers on the 0:12:23.720 --> 0:12:26.720 top level look good, it's still not good. And credit 0:12:26.840 --> 0:12:29.640 is about is tight, at least for residential mortgage, as 0:12:29.679 --> 0:12:33.200 it was in the days following Lehman. So so, I 0:12:33.280 --> 0:12:35.560 never thought in my career that I would be saying 0:12:35.559 --> 0:12:41.440 that tight lending conditions are making housing prices rise. But 0:12:41.559 --> 0:12:44.360 they are, but they really it's it's a combination of 0:12:44.480 --> 0:12:48.760 tight lending conditions following a boom and bust in real estate, 0:12:48.800 --> 0:12:51.200 because you end up with a lot of people who 0:12:51.280 --> 0:12:54.000 don't have any look, under normal circumstances, you're in the 0:12:54.040 --> 0:12:58.400 house for seven years. Even if you have tight credit conditions, 0:12:58.520 --> 0:13:01.800 you should have some equity in the house. But if 0:13:01.840 --> 0:13:05.040 you bought at the peak before at correction, if you 0:13:05.080 --> 0:13:08.600 put little or no money down, there is no equity there, 0:13:08.720 --> 0:13:11.360 and that locks you into that house unless you're just 0:13:11.360 --> 0:13:13.640 gonna walk away. And if you do that, good luck 0:13:13.720 --> 0:13:15.760 qualifying for right. And I think that you know, the 0:13:17.600 --> 0:13:20.680 narrative about housing right now is this idea that you know, 0:13:20.960 --> 0:13:24.000 is the housing recovery losing steam? You know, are we 0:13:24.080 --> 0:13:27.880 seeing you know, projections for housing price increases are going 0:13:27.920 --> 0:13:30.240 to be less this year than they were last year. Well, 0:13:30.320 --> 0:13:34.080 last year was based on artificial conditions. I must see 0:13:34.440 --> 0:13:37.400 two thousand thirteen from the context of the US housing 0:13:37.440 --> 0:13:42.800 market as as really a an anomaly. In other words, 0:13:42.840 --> 0:13:45.719 in two thousand ten, eleven twelve, we have this pent 0:13:45.800 --> 0:13:48.160 up demand the election cycle to build up to the 0:13:48.160 --> 0:13:52.200 fiscal cliff. The world apparently didn't end after the fiscal 0:13:52.240 --> 0:13:54.920 cliff expired, and there was all of a sudden a 0:13:55.320 --> 0:13:58.280 concern about rising interest rates because the economy was going 0:13:58.360 --> 0:14:01.160 to get better, and you had all the fence sitters 0:14:01.440 --> 0:14:04.600 moving out of them out of their tax change as well. 0:14:04.800 --> 0:14:07.280 And that if the tax change was certainly well on 0:14:07.320 --> 0:14:09.760 the high end of the market, especially and you had 0:14:09.800 --> 0:14:13.240 people rush in, and you still have the low inventory issue, 0:14:14.200 --> 0:14:17.199 prices rise. Now we're you know, we're doing these year 0:14:17.200 --> 0:14:21.560 over year comparisons and activity or prices. If they're not 0:14:21.720 --> 0:14:24.360 above last year, it's somehow a failure or a sign 0:14:24.400 --> 0:14:27.560 of weakness. When I contend it's the wrong comparison to make, 0:14:27.880 --> 0:14:30.960 it absolutely is. We're discussing real estate in America with 0:14:31.040 --> 0:14:34.400 Jonathan Miller. So now let's talk a little bit about 0:14:34.760 --> 0:14:40.160 the high end. We understand what's constraining everybody's houses. The 0:14:40.960 --> 0:14:43.000 normal I don't even know what to call of. The 0:14:43.040 --> 0:14:46.000 median house is about two D seven thousands, right, it's 0:14:46.240 --> 0:14:49.800 right exactly somewhere on that and you know, obviously it's 0:14:49.800 --> 0:14:53.440 really regional. Two seven thousand in the New York metro 0:14:53.520 --> 0:14:56.040 area doesn't get you a lot. One of the people, 0:14:56.080 --> 0:14:59.200 am I get to a closet in a hallway that 0:14:59.240 --> 0:15:01.640 you're going to buy from the co op to combine 0:15:01.640 --> 0:15:04.120 with your apartment. One of the people in my office 0:15:04.600 --> 0:15:07.480 transferred here from Syracuse. They sold a house for a 0:15:07.520 --> 0:15:10.120 hundred and seven thousand NOWS and I'm like, what is 0:15:10.480 --> 0:15:12.200 I don't understand. You look at a picture of it. 0:15:12.760 --> 0:15:15.880 It looks like a regular little you know, a starter house, 0:15:15.920 --> 0:15:18.280 a ranch. But it would go for three in change here. 0:15:18.440 --> 0:15:25.480 So when we talk about normal housing, what, what is 0:15:25.520 --> 0:15:28.040 the story? What should we expect in the near future 0:15:28.320 --> 0:15:35.120 from this housing market? Has the death of housing been exaggerated? Yes? Absolutely. 0:15:35.200 --> 0:15:39.120 I think all it is is a reset from the 0:15:39.160 --> 0:15:42.480 euphoria that we had last year, which was based on nothing. 0:15:42.840 --> 0:15:44.760 I like to say it really was based on this 0:15:45.800 --> 0:15:50.600 horrible skew created by by tight credit that we're already 0:15:50.600 --> 0:15:54.640 seeing a spread or a widening in general between the 0:15:54.720 --> 0:15:57.120 high higher end of the market and the balance of 0:15:57.120 --> 0:16:01.080 the market in the context of the credit conversation we're 0:16:01.120 --> 0:16:06.440 just having because it's so as you move up in price, 0:16:06.800 --> 0:16:10.560 there's a higher probability of either more cash paid or 0:16:10.600 --> 0:16:15.840 just all cash Outright. You also have the the the 0:16:15.880 --> 0:16:19.400 preference by foreign or international buyers towards the high end 0:16:19.400 --> 0:16:23.640 their global investors. Urban markets along the eastern seaboard, on 0:16:23.680 --> 0:16:30.360 the West coast very similar, Phene, San Francisco, Seattle, Vancouver, Canada, 0:16:30.440 --> 0:16:34.040 absolutely very similar. And and that's that's a key driver. 0:16:34.400 --> 0:16:38.640 But other is that we're seeing a disparity between conforming 0:16:38.680 --> 0:16:41.520 mortgages through the former g s c S versus jumbo 0:16:41.680 --> 0:16:45.720 right that that banks like jumbo mortgages. They make money 0:16:45.760 --> 0:16:49.120 on them, they want to so the business decision, well, 0:16:49.240 --> 0:16:52.280 slago is what and they like own the jumbo mortgage 0:16:52.320 --> 0:16:55.560 market right right there, they're they're a huge lion share 0:16:55.600 --> 0:16:59.280 of the market nationally. But but any lender right now 0:16:59.440 --> 0:17:03.240 is looking to do jumbo deals because they make a 0:17:03.280 --> 0:17:07.400 favorable return on it. And then and and the the 0:17:07.400 --> 0:17:10.960 the alternative, the the g SC related transactions, which is 0:17:11.760 --> 0:17:16.240 of the mortgage market is still burdened by in many ways, 0:17:16.280 --> 0:17:21.040 the credit outlook within that realm is very backward looking. 0:17:21.040 --> 0:17:24.520 It's looking at the transgressions. The conservative element is from 0:17:24.600 --> 0:17:28.159 the UH you know, the transgressions that were made several 0:17:28.200 --> 0:17:33.000 years ago, the Department Justice going after banks for bad 0:17:33.080 --> 0:17:36.880 lending practices, all those sorts of things. So it's very 0:17:36.920 --> 0:17:39.600 backward looking, whereas I think the jumbo finance arena is 0:17:39.720 --> 0:17:43.520 very much more current looking. Today, we're discussing real estate 0:17:43.920 --> 0:17:48.080 and housing with Jonathan Miller. Earlier we were talking about 0:17:48.600 --> 0:17:53.600 the difference regionally. How have these recoveries differed. You know, 0:17:53.680 --> 0:17:57.040 I know South Florida is different than Arizona, is different 0:17:57.040 --> 0:18:00.320 than Las Vegas, is different than Southern California, which is 0:18:00.359 --> 0:18:03.800 obviously different than On Valley in Northern California. How do 0:18:03.880 --> 0:18:07.439 these different regions compare and what does that mean for someone, 0:18:07.560 --> 0:18:11.199 let's say living in New York or Washington, d C. Well, 0:18:11.600 --> 0:18:13.879 when you look at you look at a lot of 0:18:13.920 --> 0:18:16.159 the the national housing metrics, and you look at the 0:18:16.200 --> 0:18:20.040 comparison by city, and you'll see generally what you see 0:18:20.119 --> 0:18:23.560 is markets that were hit very hard. Probably the hardest 0:18:23.640 --> 0:18:26.240 were the markets in the what fd i C calls 0:18:26.280 --> 0:18:29.040 the Sand States, the Las Vegas of the world, essentially, 0:18:29.080 --> 0:18:31.760 where there was a tremendous amount of speculation, carpenters and 0:18:31.880 --> 0:18:35.920 nurses quitting their jobs and becoming real estate speculators, and 0:18:35.920 --> 0:18:41.080 and so they fell much harder and farther. And you 0:18:41.119 --> 0:18:42.560 know that what I like, the way I like to 0:18:42.600 --> 0:18:44.879 describe it is when you go from a dollar to 0:18:44.960 --> 0:18:48.399 two dollars, it's a dred percent increase. So the metrics 0:18:48.600 --> 0:18:51.320 in terms of showing their increase made them look like, Wow, 0:18:51.320 --> 0:18:55.320 they're really recovering much more quickly than other other markets 0:18:55.359 --> 0:18:58.240 like New York, for example, that didn't have the speculation 0:18:58.840 --> 0:19:02.760 that you saw in these markets. So it's really almost 0:19:02.760 --> 0:19:06.359 in apples and orange comparison. What you're seeing now is 0:19:06.600 --> 0:19:10.800 the markets that are seeing rapid rapid price growth. Some 0:19:10.920 --> 0:19:13.480 of them, like in Las Vegas, the rates are cooling 0:19:13.680 --> 0:19:19.320 rapidly because they've they've essentially recovered a lot of the 0:19:19.359 --> 0:19:22.480 almost overcorrection that had occurred in those markets is a 0:19:22.480 --> 0:19:25.240 lot of low hanging fruit, a lot of low hanging fruit. 0:19:25.560 --> 0:19:29.680 Whereas markets were the economy is very fundamentally, very strong, 0:19:29.760 --> 0:19:33.240 they didn't have a lot of speculation. Uh, you would 0:19:33.240 --> 0:19:35.439 allude you had talked about it in an earlier segment 0:19:35.480 --> 0:19:38.000 about you know, someone from upstate New York and how 0:19:38.040 --> 0:19:40.400 much you got their market, their markets in the country 0:19:40.400 --> 0:19:44.440 that didn't experience the same boom and bust. So they're 0:19:44.480 --> 0:19:47.680 not going to rise from the the ashes because it 0:19:47.680 --> 0:19:51.520 didn't really fall to the ashes. So so I think 0:19:51.520 --> 0:19:55.920 the rule number one is there is no national housing market, uh, 0:19:55.960 --> 0:19:58.119 in the in the way that it's presented to us 0:19:58.160 --> 0:20:01.719 every month with all the reports. And and and secondly I too, 0:20:01.720 --> 0:20:03.880 by the way, to be fair to case Shiller, they 0:20:03.960 --> 0:20:09.880 do release their twenty and forty metro region housing prices 0:20:09.920 --> 0:20:14.040 and then they jumb them all together. So when you 0:20:14.080 --> 0:20:17.320 look at the individual index, you could still see and 0:20:17.480 --> 0:20:18.960 there are a number of people who then take the 0:20:18.960 --> 0:20:21.439 case Shiller data and slicing dice. In nice Land, you 0:20:21.440 --> 0:20:24.160 could see. A couple of weeks ago, I ran two 0:20:24.200 --> 0:20:26.960 different charts I forgot who I stole them from. One 0:20:27.040 --> 0:20:32.040 showed the percentage recovery off the lows and how far 0:20:32.119 --> 0:20:33.960 they still have to go to get to the highs, 0:20:34.200 --> 0:20:36.239 and they were like Las Vegas was in both they 0:20:36.240 --> 0:20:39.280 were crazy Wow. We're up off our lows, but we're 0:20:39.280 --> 0:20:43.960 still But remember the high point that was reached was 0:20:44.080 --> 0:20:48.960 complete fabrication and consense. It was based on right, it 0:20:49.000 --> 0:20:52.200 was based on They were building these excerbs in Las Vegas, 0:20:52.480 --> 0:20:55.560 these big McMansions. That was a two and a half 0:20:55.560 --> 0:21:00.159 hour drive from any urban center, any job center. So 0:21:00.359 --> 0:21:03.199 how are you going to support these homes if it 0:21:03.280 --> 0:21:06.400 takes you whatever four hours round? Because what was driving 0:21:06.480 --> 0:21:11.000 the demand was lenders were just looking to lend. That 0:21:11.080 --> 0:21:13.879 was how they made money. They package up the mortgages 0:21:13.920 --> 0:21:15.920 and sell them off to the offl of the risk 0:21:15.960 --> 0:21:18.760 of somebody else. We're not in that world anymore, that's right. 0:21:18.800 --> 0:21:21.879 The the shift in credit, and I've written about this 0:21:21.960 --> 0:21:26.320 over the years, went from the borrower's ability to service 0:21:26.400 --> 0:21:29.760 the loan to the lenders ability to sell the loan 0:21:29.840 --> 0:21:33.280 to a securitizer. Once that shifted in the borrower's ability 0:21:33.320 --> 0:21:35.840 to service, it no longer matter to hey, it was 0:21:35.880 --> 0:21:38.760 just a matter of time before it collapsed. So so 0:21:38.840 --> 0:21:43.840 now we talked before briefly about other regions. Texas is 0:21:43.880 --> 0:21:46.119 an unusual region. I don't think a lot of people 0:21:46.200 --> 0:21:50.600 realize why Texas avoided the boom and bust. There was 0:21:50.640 --> 0:21:53.840 a change in their constitution. I think it was like 0:21:53.880 --> 0:21:56.959 a century ago where they are not allowed to do 0:21:57.080 --> 0:22:01.840 cash out. No cash out refinances against their state constitution. 0:22:02.160 --> 0:22:07.879 So everybody maintaining their falling income, replacing it with helocks 0:22:07.920 --> 0:22:13.439 and financing their their day to day. Uh. When you 0:22:13.520 --> 0:22:16.240 run low on money, you just borrow more because how 0:22:16.480 --> 0:22:19.439 prices always go up. The other the other quirk in 0:22:19.600 --> 0:22:25.280 Texas is the idea that the transactions aren't publicly publicly recorded, 0:22:25.359 --> 0:22:29.240 So so any any studies that are done come out 0:22:29.240 --> 0:22:32.359 of the realtors, which is really a subset of the 0:22:32.400 --> 0:22:35.840 public record to begin with, so it's not a full 0:22:35.960 --> 0:22:38.800 data set. So you could almost argue too that ignorance 0:22:38.880 --> 0:22:43.960 is bliss, that that the market wasn't fully informed of. 0:22:44.320 --> 0:22:46.800 So if I use a Zilo app and show me 0:22:46.840 --> 0:22:49.400 what's sold nearby in Texas, I'm not going to see 0:22:49.440 --> 0:22:54.320 the same thing that I see anywhere in ins not 0:22:54.359 --> 0:22:59.200 necessarily because the information isn't it's a nondisclosure state. So 0:22:59.560 --> 0:23:02.760 there many non disclosure I don't know offhand. I want 0:23:02.800 --> 0:23:06.399 to say there's about a dozen. Okay, today I'm speaking 0:23:06.400 --> 0:23:10.280 with my friend Jonathan Miller of Miller Samuel. He is 0:23:10.480 --> 0:23:16.560 an expert on real estate appraisal, transactions, home values, etcetera. 0:23:16.720 --> 0:23:20.199 He has crunches, crunched a lot of data over the 0:23:20.240 --> 0:23:23.840 past few decades about what drives housing. And one of 0:23:23.920 --> 0:23:26.600 the things we really haven't talked about much but I 0:23:26.640 --> 0:23:31.200 want to discuss is the international component about this. The 0:23:31.280 --> 0:23:36.080 international buyers coming here to North America buying up real estate, 0:23:36.640 --> 0:23:40.440 and the booming real estate markets we see in big 0:23:40.440 --> 0:23:44.000 cities overseas. So why do we want to start with that, Well, 0:23:44.800 --> 0:23:48.040 we'll start with the basic driver of it is I'd 0:23:48.040 --> 0:23:53.120 like to say that global real estate, or specifically luxury 0:23:53.160 --> 0:23:56.959 real estate, high end real estate in the in in 0:23:57.000 --> 0:24:00.800 the context of world a worldwide content text is the 0:24:00.840 --> 0:24:04.800 world's new currency. In other words, you need bitcoin, You 0:24:04.840 --> 0:24:09.760 just need a really nice apartment for a nice mion 0:24:09.760 --> 0:24:12.600 dollar price tag. So what you're seeing is you're seeing 0:24:12.640 --> 0:24:17.120 across and this has really been a phenomenon that's virtually 0:24:17.160 --> 0:24:20.840